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Is it Time to Leave the Rich Alone?

Because of the Occupy Movement, people are focused on the rich, or the 1% as they are now known. CNN [3] reported that in order to get in to the exclusive 1% you have to make a minimum of $343,927 each year.

I figured it would be much higher and I thought of the article that appeared in my hometown newspaper [4] that told the story of a city bus driver who was making $98,000. There are truck drivers and rig operators in North Dakota [5] who are transporting oil for salaries starting at $100,000 with an almost endless amount of overtime and apparently those jobs are still plentiful. They can’t find enough workers to fill these jobs! Some of these sometimes called “roughnecks” are almost half way to the 1% club after bonuses.

Did you know that the 1% earned 17% of the nation’s income and paid 37% of all income tax in the United States, according to CNN [3]? CNBC, in a recent on air report, said that in reality only 3% of the 1% club is actually in the financial industry, by the way.

According to Wall Street journalist Robert Frank, who released a new book, “High Beta Rich: How the Manic Wealthy Will Take Us to the Next Boom, Bubble, and Bust”, rich people spend a lot of money and by spending large sums they keep a sizable amount of people in business.

Yacht and airplane builders, people who are building the 1%’s vacation homes, high end retailers like Tiffany, high end restaurants and caterers, and country clubs and those are just the direct effects. There are a whole host of companies that see indirect positive impact from the spending habits of the rich as well. If that’s true, it seems to at least in part refute the idea that rich are taking a lot and giving very little. If you’re looking for some interesting reading, pick up Frank’s book.

Still, I don’t think many are denying that the rich have a disproportionate amount of the nation’s wealth. The top quintile of income earners hold 80% [6] of the nation’s wealth yet receive tax breaks that others do not. Billionaire investor Warren Buffett [7] paid only 17% of his income in taxes while the middle class paid an average of 20.4% according to the CBO [8] report issued in June of 2010 of demographics back to 2007.

I’m definitely on the side of Warren Buffett who believes that the rich should pay their fair share but I’m not as sympathetic to those people who believe that wealth should be evenly spread. I appreciate the idea that it should be more evenly spread but I don’t believe that capitalism is all about fairness. According to some macroeconomic theories, there is a reason for the income gaps and most don’t have much to do with what the protesters believe.

First, there is less demand for unskilled labor as more of those jobs go to other countries or become computerized. Next, the wealthy have the ability to invest in wealth producing products like real estate, stocks and bonds, and derivative products and yes, it’s true that a cut in the income tax for the wealthy had an effect as well. Is it realistic or reasonable to ask the rich to not take advantage of legal means of cutting their taxes? How many middle class households voluntarily give up tax deductions that they are legally entitled to?

Let me get to the point:  Maybe this controversy is best solved by meeting in the middle. There’s a lot of talk about the income gap but very little about the fact that wealth is built over time by doing the right things with our money and America, as a whole, is a country full of not bad, but awful household money managers. I feel comfortable in my belief that every household in America could cut expenses somehow or could have made better decisions in their past that would allow them to be in a better financial position today.

The millionaire next door is the millionaire who saved and invested all of their life and retired with seven figures. Maybe the rich can pay more taxes but the rest of us can get radical with how we spend and save. I’m not saying it will solve the problem but let’s be honest. We wouldn’t much care how the top 1% lived if unemployment were lower and wages higher. We’re a little tired of this economy and that’s ok.

Maybe it’s time to not worry so much about the rich and go after the people we have the power to change: Ourselves and our own financial habits. Call me too idealistic but I still believe that America is a place where anybody can be anything that want to be. Dave Ramsey believes that we just don’t get radical enough with how we take control of our finances and I completely agree.

How about we meet in the middle. The rich can pay more taxes but we can do a better job of managing our own money. I don’t know about you but I’ve had a much easier time changing me than trying to change others.

What do you think?